May 2004

2004 Rate Increase

There seems to be a lot of confusion over the new rate increase, which went into effect on April 1, 2004. Both Newsday and the Leader had articles on the rate increase which only generated a lot more questions for the Utility staff. I am writing this column to help clear up some of the confusion. Here are some of the facts:

Freeport Electric was approved for an 18.2% rate increase.

That rate increase went into effect on April 1, 2004.

Our customers will see the full rate increase in their bill, however, they will not have to pay the full amount. Each month customers will receive a credit. The credit is due to a lawsuit that the Utility initiated and won. A portion of the settlement moneys from this suit will be applied to each customer's bill in the form of a credit. The credit will be applied monthly until April of 2005 or until it runs out. The credit will show as a new line on the bill called "Rate Modifier".

As a result of the credit being applied each month, residential customers bills will be reduced by approximately 11 %. Since this is occurring at the same time as the new rates are being instituted, the net effect to our residential customers will appear as an increase of approximately 7%. The credit will appear as a line item called "Rate Modifier".

You will be billed the full 18.2% increase and you will pay the 18.2% increase less the rate modifier credit. The net effect is approximately a 7% increase.

The new generation unit is now on line and selling into the wholesale energy market.

All profits from sales made to other than Freeport customers will be placed in a separate account.

In May 2005, all profits from the sale of energy to others in the prior year will be given back to our customers on a monthly basis and shown on the bill as a "Rate Modifier". Profits will be calculated on an annual basis.

Because we are in a competitive market, it is difficult to determine the amount of profit that will be made in any one year. In addition, it also depends on how much energy Freeport residents and businesses use. The more energy we use as a Village the less there is to sell on the Market and the less profit there is to return to our Village customers.

Please remember that there is no new rate increase in the second year. The 18.2 % increase went into effect in April 2004. However, because the Utility will be returning profits to our customers in the second and succeeding years our customers may never have to pay the 18.2 % rate increase. It will always be the full bill minus the rate modifier.

There is no guarantee that a profit can or will be made in any year.

If no profit is made that year then there will be no rate modifier and the full amount of the bill will have to be paid.

Confused - Easy to see why because it can be confusing. A key fact to remember is that you will not see the full impact of the 18.2% rate increase in the first year because money will be returned to you as a credit. You may not see the full impact of the rate increase in the second year and after because Freeport Electric will be selling excess energy into the wholesale energy market and the profit from that sale will be returned to you as a credit on the bill.

While I know that all of you are concerned about the increase, I want you to know that Freeport Electric is doing everything possible to keep the cost down. Unfortunately, we are now operating in a competitive wholesale energy market, which has already raised our energy costs by 30%. In addition, the New York Power Authority (NYPA) is raising the cost of our Hydro energy by 40% over a 4-year period. The first portion of the NYPA rate increase is already in effect. These outside forces are difficult to control but members of Freeport Electric's Staff have been active in many of the State committees at the New York Independent System Operator, which controls the wholesale energy market. As a result of this involvement, we have been able to minimize and in some cases eliminate increases that would have affected the cost of energy to you, our customers.

Energy Tip

Use small electric pans or toaster ovens for small meals rather than your large stove or oven. A toaster oven uses a third to half as much energy as a full sized oven.